Auto Detailing Liability Insurance

Auto Detailing Liability Insurance

One of the most important aspects of running any kind of business is having the right business insurance coverage. Auto Detailing Liability Insurance is no less important. With a detail shop, your insurance requirements are more specific than many other businesses. This is due to the fact that you have higher potential liabilities while you are working on your customer vehicles. As a result of that you also need a more specific version of auto detailing liability insurance called Garage Keepers Liability Insurance. General liability insurance alone won’t cut it, you need garage keepers liability to cover the vehicle while in your care, custody and control. Your insurance agent can give you more specifics about this important coverage.

Ask For a Business “Certificate of Insurance”

If you are a potential detailing or tinting customer, one of the things you need to do is ask for a business “certificate of insurance”. This breaks down exactly what their coverage is in regards to the services they are performing for you. Reputable shops will have one right in the office they can either copy for you or fax to you. Many of our customers will simply ask us to fax them a copy before they bring their car down for service. Why are they looking for this?

Regardless of what kind of vehicle you have, you want to make sure it’s protected while under the care, custody and control of the shop and it’s employees;

If you have a more expensive vehicle you want to make sure their coverage exceeds the value of your car. For example, a $90,000 BMW owner would want to look for at least $100,000 in “Garage Keepers Liability Coverage”. This means that the shop is covered regardless if they drive your car into a wall or the shop burns down while your car is in it;

General Liability will not cover your car! This is important. A lot of shops will try and get around having Garage Keepers Liability while simply carrying General Liability and telling their customers they are fully insured. They are not. General Liability covers your painter if he drops his ladder through your stained glass window, but he’s not in control of your house when he does that damage. Garage Keepers Liability covers the shop while they are in the care, custody and control of your vehicle. There’s an important difference. Most reputable shops carry both General and Garage Keepers Liability.

You want to call the insurance agent that is listed on the certificate and make sure to check on auto detailing liability insurance and garage keepers liability insurance coverage. Also, verify that the policy coverage will be in force when you bring your car down to the shop. They will usually verify this for you over the phone. You can also ask them how long they’ve had the policy and whether or not they’ve had any claims. Sometimes the agent will tell you and sometimes they won’t. They will at least tell you whether or not the policy is current, active and in force.

Care, Custody and Control

So why is auto detailing liability insurance so important from a shop owner perspective? Here are some things you may not have thought of. Did you know that while your customer’s vehicle is in your care, custody and control (three C’s, an insurance term), you are totally liable for that vehicle?

Using Personal Auto Insurance as Shop Insurance is a Big No, No!

Small detail shops are frequently caught committing fraud. Many times without knowing it. They soon find out that ignorance is never a defense when it comes to breaking the law. How are they committing fraud? Well, using personal auto insurance as shop insurance is a big No, No! Get caught and you’re screwed. Especially if you lie to an insurance agent, adjuster, police officer or customer about having the “proper insurance”. This has the potential to land you in court and in a heap of trouble. Possibly even in jail. It’s a big deal. Don’t do it. If you have told customers that you are “properly” insured with business coverage.

So You Don’t Think it Can Happen To You? Think Again!

The first thing shop owners tell me when it comes to insurance coverage is, “I’ve never messed anything up, never had a claim, never had a problem”.Same old story, different day. So you don’t think it can happen to you? Think again! I tell people they just jinxed themselves by telling me that. Here are some of the things that have happened at my shops and mobile rigs over the years:

Burn the paint on a car. One of my new guys went straight to the metal thinking it was “dirt” he was buffing off.

Ruin or burn carpets with the wrong cleaner.

Accidentally etch a windshield with acidic cleaner. This happened several times until we finally switched to a non-etching cleaner because the windshields were costing us so much money.

Back a car into another customer car. Oh yes, it happened. A few times.

Drive a car through the shop garage door. This happened both forwards and backwards. With the same guy. I moved him to our industrial pressure washing team where he wasn’t driving anything. He became one of my most loyal people.

These are just a few examples of the many “accidents” that have all happened at my detailing businesses over the years. It just goes with the territory when you have a booming business with lots of employees. The courts and insurance carriers don’t care if you “didn’t know”. You are expected to know these things if you are in business.

Nothing Good Comes From Lies

So get proper insurance coverage for your business. Start with Auto Detailing Liability Insurance and then go from there. It’s not the only insurance you need to be in business. And never lie. I don’t mean that from a morality basis. It’s just bad for business. Nothing good comes from lies. A customer will catch you and put the word out about you and your business. Trust is almost impossible to earn back after you’ve been caught in a lie. Insurance carriers will drop you, or worse. Other businesses with black ball you. See what happens if you get caught in a lie with a dealership. And you need to set an example at your business. We had a zero tolerance policy at our shops. Our guys knew the rule, “you lie, you’re out”. Simple.

Are You a Sleezy Shop with 1099 Contractors or Cash Workers?

When it comes to insurance, another important aspect to think about is the classification of your employees. Are you a sleezy shop with 1099 contractors or cash workers? If you are, you need to fix that. I’m not passing judgment. Actually I am. We never had this situation. When we were growing fast, there were a few times I had to borrow money from my personal savings to cover payroll, employment taxes, etc. Just workers comp alone will kill many small businesses. I get it. I even missed a few quarterly tax payments when we had several bad months in a row. Getting caught up nearly killed my business. So I’m telling you from experience. I get what you are going through. Taxes are an unfortunate part of business. Just keep up with them and everything will go smoother for you. Paying workers by check as 1099 contractors is bullshit. You’re not being smart and getting around anything. If you get audited, the IRS will notify the Department of Labor and you will have to pay years of back taxes that you’ve been getting away with. Try firing a “1099 worker” who then goes to file unemployment because they don’t understand what a 1099 contractor is. That’s all it takes to trigger an investigation of you and your shop.

“Cash” and “Under the Table” Workers

Don’t even get me started on “cash” and “under the table” workers. It’s just stupid. You may think you’re getting away with something, but it will eventually catch up to you. I know this from experience. A friend of mine used to boast about paying all his workers under the table. For like a decade. He would just laugh at us for paying taxes like responsible businesses. Then he got nailed in an audit. It wasn’t just a normal audit either. The IRS actually sat outside his business and counted customer cars and employees for a few months. They even got their own cars detailed to get pricing and watch the inner workings of his shop while they waited. Then they nailed him and took his business, his house, everything.

Don’t be stupid. Follow the rules. And don’t lie. Three simple rules to follow that will help all aspect of your life. I’m no fan of taxes, but you have to pay them or eventually they will come take them from you.

1099 Contractors Aren’t Employees So No Insurance Covers Them

We cover this in more detail on our Detail Shop 1099 Contractor page. I’ve also written a few posts on the subject. As far as insurance is concerned, 1099 contractors aren’t employees so no insurance covers them. I won’t even mention cash workers because, well, stupid is as stupid does. Insurance won’t cover an accident if your “contractor/employee” is involved. Even if you lie and say they are an employee. The insurance adjuster is going to have your $10 or $15 an hour employee state, under oath and penalty of jail time for insurance fraud, that they are an employee. The adjuster might even demand payroll records if they are suspicious of their status as an employee. You will get caught. I’ve seen shop owners that I’m still friends with that had to shut down their businesses because they got nailed with penalties and fines for getting caught doing this.

Garage Keepers Liability Insurance with Transporter Plates

Insurance is also tough when transporting cars. In Pennsylvania, they have special plates called “Transporter” plates. Auctions use these plates to transport cars between auctions and dealers. Detail shops use them for the same thing, except they aren’t really designed for that. The only way you can get “transporter” plates is to convince a dealership to do a contract with you that says you will be transporting cars for them. The application specifically says that you can’t be driving their cars between your shop and the dealership. So basically they don’t want detailers moving cars and this is their way of making it hard on them. You need garage keepers liability insurance with transporter plates since you will be housing the cars when you transport them to your shop. Even though technically you shouldn’t be doing that. We cover this in more detail on our Detail Shop Transporter Plate page. Our shop got around this by just getting repair/towing plates since we were doing auto reconditioning services on cars. It worked out and allowed us to stay in compliance with the law. Check out the transporter plate page for more info on this.

Just Do The Right Think and Get The Proper Insurance Coverage

The detailing business is like any other when it comes to being properly insured. The reason you have auto detailing liability insurance is to make sure you are covered in the event something bad happens. So by cutting corners like many detail shop owners do, eventually you will get burned in some scenario that you might have thought sounded good but in reality just doesn’t work. Just do the right thing and get the proper insurance coverage with good auto detailing liability insurance and garage keepers liability insurance. You will be glad you did.

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